Lost Nation Theater founders Kim Bent, left, and Kathleen Keenan went to the Statehouse last week for a ceremony in which Gov. Peter Shumlin honored the Montpelier theater company.

One of Vermont’s smallest professional theater companies, Lost Nation Theater — which has now occupied Montpelier City Hall for 25 years — barely makes it financially each season.

But its artistic contributions have convinced the capital city that it needs its own professional theater, which both the city government and the community support.

“It’s a miracle,” said Kathleen Keenan, who runs the theater with her husband, founder Kim Bent.

“I’m not sure that I know why,” she said. “This stage was here, it was empty. We showed people we could have the vision. We demonstrated to people what it could be — with a few bits of fabric and 10 lights.”

Lost Nation’s current production may explain much of its staying power. “Ransom,” an original play with music, is based on letters home from West Rochester soldier Ransom Towle. Originally created by the Rochester community theater, the White River Valley Players, Lost Nation has turned it into a full-fledged production, directed by Bent.

“Ransom” has caught the region’s attention, including that of Vermont Public Radio and Gov. Peter Shumlin — who just made 2013 the Year of Lost Nation Theater.

“We are a professional company,” Keenan said. “We’ve always been community minded — we want this to be relevant.”

She added, “I think we’ve succeeded because we’ve been able to combine the spontaneity and improvisational excitement of wanting to do a show — that’s the heart of good community theater — with some kind of professional structure.”

Bent added, “To maintain that, to bring those two things together is really appropriate for the community.”

Bent, a Vermont native, created Lost Nation Theater as a solo touring company in 1977. Keenan, a professional singer-songwriter as well as being trained in theater, met Bent while the two were involved in projects at Long Island University, and they began working together in 1984.

Montpelier City Hall was the original home for David Mamet and William H. Macy’s now famous Atlantic Theater Company. When the troupe moved to Burlington, Montpelier City Council advertised in Variety magazine for a professional theater to replace it.

Not surprisingly, local theater companies were irate. In response, Bent and Keenan, together with other local groups like Unadilla Theatre and Phantom Theater, created a summer season in 1989.

“We literally had two weeks to put it together,” Keenan said. “We brought up shows we knew people in New York were doing. We did a couple of our own and other theaters participated.

“Of course we all lost our shirts, and it was so much work,” she said.

The other theaters left — and Lost Nation Theater remained.

City Hall Arts Center, in those days, existed in name only. The cavernous auditorium was just a big open space with a little stage at one end. Over the years, Lost Nation and the city have developed it into a sophisticated center that can be configured into anything from a small intimate theater to the wide open space where elections are held.

Currently, Lost Nation Theater annually produces six full productions, from musicals to comedies to Shakespeare, from April to October, plus two or three youth shows. For its annual Winterfest series, Lost Nation presents four shows from other organizations. Two holiday events, Halloween’s “Poe Spooktacular” and “It’s a Wonderful Life” at Christmas, plus other special events, round out the season.

That’s done with a $300,000 annual cash budget, but the amount doubles when “in-kind” donations of services and materials are included. The biggest example is the theater’s agreement with the city.

For managing City Hall Arts Center, which is used by others as well as Lost Nation, the theater receives the space rent-free and the city covers heat and electricity. Conversely, it requires Lost Nation to employ a full-time technical director year-round.

Lost Nation’s income sources are typical for Vermont’s professional theaters. A little more than half comes from earned income, ticket sales and program fees. The remainder is from private contributions, sponsorships and grants.

“At this point we need to increase both,” Keenan said. “Right now, we’re hanging on. It’s up and down — and this is definitely a down.”

Recently, expenses that the theater has no control over have increased sharply. In addition to the accounting costs of the new sales tax, workers’ compensation fees have nearly tripled.

“How do we make that up?” Keenan said. “There’s staff that doesn’t get hired. So I am the box office person, the marketing person, and the producing artistic director. That’s not something that we can continue.”

And the recession has hit the company, as well.

“We’ve seen an erosion in our support base, certainly, over the past three years,” Bent said.

Some regular patrons have either reduced their contributions, or stopped them altogether. Attendance is also down.

“At the same time, the quality of the shows that we’ve been doing is getting better and better — and we’ve started to receive these awards out of the blue,” Bent said. “In some ways we’ve mitigated (the downturn). People get excited about a show and attendance builds to the end.”

“We’ve got really talented people who are magicians and can do a lot with a little,” Keenan said.

“We’ve built up a core group that really understands what we’re trying to do and the talent to really pull it off,” Bent said. “Making choices that includes those kinds of folks is becoming important more and more.”

Finally, Lost Nation Theater looks to its community — which has supported it through thick and thin. The company already has the support of 100 to 150 volunteers each year. Three years ago, when Bent was temporarily stricken with a life-threatening illness, people came through.

“There were folks that said OK, and either came back to work for the theater for free or for hardly anything at all,” Keenan said. “So I was never really worried.”

That isn’t the first time that the community showed its support of Bent and Keenan. A decade ago, during its production of “Sweeney Todd,” seats in the barber’s chair of death were sold as a fundraiser — “Murder for Sale.”

“We got a summons from the City Council,” Keenan said. “We had never been summoned before. So we go into this city council meeting. What do we do? What do we say? We were out of our minds.”

The City Council had issued a proclamation — that Keenan and Bent get out of town.

Unknown to them, Dona Bate and Ron Wild, longtime Lost Nation supporters, had raised the funds in the community for Bent and Keenan to spend three weeks in England and Ireland.

“It was our first vacation — ever,” Keenan said.

“We have been blessed by other people who believe in this vision — professional theater that speaks to the community,” Bent said.